by phil - November 23rd, 2015 6:13 am
One Million Dollars!
That's up 66% on our main, paired portflios as we approach our 2-year anniversary. 66% is our 3-year goal for the Long-Term and Short-Term Portfolio strategy so of course we decided to lock in our gains after having a rough ride in September, when the LTP balance fell as low as +26% on September's dip to S&P 1,870. That led us, in our last review, to add another $50,000 worth of downside protection in the STP and it worked perfectly, as the October dip barely touched us.
Well, not PERFECTLY, our net balance on the Long and Short-Term portfolios has dropped from $1,020,881.30 to $1,002,144.60 – down $18,736.70 (1.8%) for the month. As I noted in our Chat Room, we did add ABX, ARO, BHI, BRCM, COH, IRBT, RIG, UNG and YHOO trades since our last review so we're hardly sitting on our hands – just playing the market cautiously in the final quarter since we're so far ahead in the game.
Unfortunately, like all prevent defenses, you end up giving back a little ground in the interest of preserving the greater victory. Of course, that doesn't stop us from having plenty of other trade ideas – they just weren't added to our tracking portflios yet.
AAPL, for instance was featured as it dropped back below $115 and IBM was officially announced as our trade of the year as it plunged to $130 and it's already begun to recover. At our Butterfly Portfolio Seminar in Washington last week, we went over 20 stocks we'll be watching in 2016 but mostly AFTER we get through the holidays intact!
It can be hard to sit on the sidelines in cash – especially when we've had such fun increasing our cash piles all year long. However, as I mentioned above, we had a $115,000 swing in the LTP in Sept and, despite making some offsetting gains in the STP to compensate – that was a little more variation than I was comfortable with. We did, in fact, go on a buying spree at the Aug dip…
by phil - October 10th, 2015 8:09 am
How interesting the markets have been.
In our August Top Trade Review, I mentioned we were starting a new product, which began as the 5% Portfolio and was renamed the Options Opportunity Portfolio, which has been a huge success, now up 16.7% at the close if the second month:
These are, for the most part, short-term trades but we've been layering in some longer-term trade ideas – using our profits to invest in trades that will generate steady monthly gains over time, rather than only focusing on "quickies".
Our Top Trade Ideas, generally, tend to be longer-term trades and we don't have a portfolio that tracks them specifically. They are generally selected trades from the ones that we are adding to PSW's Short-Term Portfolio or Long-Term Portfolio and tend to be of the "set and forget" variety, while our OOP trades require a bit more active management.
While 30 of our first 45 (66%) Top Trade ideas were winners, 4 of our 15 losers were Lumber Liquidators (LL) trade ideas – all of which are now coming back as LL pops back to $20! Hopefully it can break over $20 and we can put all that silliness behind us.
Getting two out of three trades right is plenty to move the investing ball towards the goal line. Combine that with sensible portfolio management techniques (diversification, managing losses, hedging) and you'll beat the S&P by a mile with no sweat. Generally, with our Top Trades, we're simply picking stocks we feel are underpriced and we're using our various options techniques to give ourselves even better discounts and hedged entries but these are patience plays – that do take time to get going, though we did call for a cash-out of our winners in July, so August was kind of a fresh start.
Without further ado, here's the next month of trades for review – some are still good for new entries:
by phil - October 5th, 2015 6:09 pm
When do you call it "too much profits?"
We just did a review this weekend and decided we liked our 12 bullish positions and 1 bearish hedge enough to stick with them without making any changes and today you can see why. Our Options Opportunities Portfolio jumped from $107,152 to $114,302 – gaining $7,150 (7.1%) in a single session. These are good companies, folks – that's why we bought them!
Unfortunately, as much as we like them, we have to be realistic about whether or not they can sustain moves like this. After all, the goal of the OOP is simply to gain 5% each month using as little of our $100,000 base as possible – gaining 7% in a day is a bit over the top! Let's take a quick look at how we got from there to here and see if we need to make any other changes. Also, we had a few new subscribers today – so I want to make sure they know which are our favorite positions and why.
On Friday, we closed looking like this:
Today, we cashed in the main part of our MU spread with a nice profit and we invested that money to pay for a more aggressive hedge with our SQQQ position. It's a good practice to always use some of the money you make on the way up to hedge for the way down – just in case:
See how easy that was? Still $7,150 in a day is a bit ridiculous and indicates we're a bit too aggressively bullish so we need to look at our positions and see if there's some we want to take off the table or protect. Cash-wise, we have the same $97,000(ish) we started with but now it's only 85% of the portfolio vs 90% of our portfolio on Friday. Not a big difference – but we don't really trust the markets enough to have too many open positions.
I did extensive commentary in the weekend post, this is just a quick review after today's big move:
- BID – We love this one and they barely
by phil - October 4th, 2015 8:33 am
One Million Dollars!
Actually $1,020,881.30 to be exact. That's the balance of our paired Short-Term and Long-Term Portfolios, up $420,881.30 (70%) in 7 quarters. Overall, our larger, Long-Term Portfolio has been performing at a predictable 31.2%, as our goal on those plays is to make 15-20% per year and it's been our Short-Term Portfolio that has outperformed, thanks in large part to long bets on AAPL and short bets on oil as well as a whole lot of well-timed hedges along the way.
By far, our best performing virtual portfolio is our STP, which is currently up 261.6% at $361,645.90 and, most importantly, it's very much in cash with $325,736 of it on the sidelines and only 10 open positions as we chose to sit out the market chop – for the most part. Keep in mind the main function of our Short-Term Portfolio is to protect the LTP and most of our LTP positions are self-hedging (short puts mainly) at the moment – so they simply don't need a great deal of protecting.
We've been putting a lot of our short-term trading power into our brand new Option Opportunities Portfolio, which I just wrote a separate review on, those are trades that would otherwise have gone into our STP, where we generally look for bearish offsets to our LTP while we also like to grab good trading opportunities as they come along.
There have been a lot of questions about access to our trade ideas lately and, to clarify, ALL trade ideas start out in our PSW Member Chat Room, which you can sign up for here as eiter a Trend Watcher Member (view Basic Chat only) or a Live Chat Member, where you can join in the conversation during the trading day. Premium Chat Memberships are currently wait-listed.
As of Friday's close, our Short-Term Portfolio (STP) was 90% in cash with these remaining open positions:
- FAS – We were HOPING Yellen could do more for us so we can begin rebuilding our FAS Money trade at a higher price but this thing died and stayed dead so far. We already made our money so it's like a
by phil - October 3rd, 2015 12:45 pm
It's actually only been 56 days but close enough.
So far, we've only had to close 10 positions (average of about one per week) for a $13,255 gain, which is 13.25% of the portfolio's $100,000 base. Our original goal was to try to make $5,000 a month, so we're well on track so far. It's been a choppy, nasty market and we've spent the last two weeks protecting our long positions more so than trying to add new ones.
The goal of our Options Opportunity Portfolio, is to take advantage of short-term OPPORTUNITIES in the market using options for both hedging and leverage. Overall our goal remains closing about $5,000 a month in profits, some of which we roll over into longer-term positions that will being paying us steady incomes as they mature.
The only new positions we added this week were Micron (MU), which had a wonderful day on Friday after earnings and finished at $15.91, well over the $15.50 target we need to make 72% on that trade. To protect our very quick gains, we also added a Jan $25/30 bull call spread on the ultra-short Nasdaq ETF (SQQQ) at $1,600, which pays $5,000 should the Nasdaq slips – so that's $3,400 of downside added against our open positions. Once you have profits, you also have a responsibility to protect them!
Before we Review our open positions, here's a quick look at the ones we've closed:
Our biggest loser, BID, is still a working, open position. We have 20 of the April $32s still open at $4.30 and we're down $2,600 so that's $1.30 per contract which means we neet to be $5.60 above our $32 strike by April option expirations (15th). The purpose of these reviews (and it's a habit you should have for all your positions) is to decide whether we are on or off track on our open items and to make adjustments were we're not on track.
by phil - September 8th, 2015 9:30 am
It's been 30 days from our Sept 8th start and our 5% (Monthly) Portfolio is only up 4.76% at $104,760. I guess we may have been too ambitious trying to make $5,000 in our first month but the good news is that this total reflects open positions that are still in progress, and mostly on track to make more, while the positions we closed during the last 30 days are OVER our $5,000 goal – at $5,330:
Not too bad considering how choppy the market has been over the past 30 days and the marketing folks have suggested (strongly) that we rename the portfolio the "Option Opportunities Portfolio", so that's the new name but our goal remains the same – we try to string together 5-10 trades a month that have a high probability of making $500-1,000 and try to have more winners than losers to see if we can add $5K (5%) to our $100K portfolio at the end of each month.
After cutting back considerably last week, our remaining open positions are:
We just reviewed the open positions on Friday, so I'm not going to waste your time and go over it all again. Suffice to say we have faith in these, or we would have cut them and their current market value of $9,800 has the potential to reach up to $25,500 plus whatever we wind up getting from BID after earnings. That's another $15-20,000 so this batch alone can give us our goal for 4 months, which is a very nice base to build off!
This is a combination of the strategies we use with our larger Long-Term and Short-Term Portfolios, where we make opportunistic trades in our Short-Term Portfolio while using our "Be the House" premium-selling strategy to do it's work on the long-term trades.
As noted in our weekend post, there are PLENTY of stocks to buy but keeping 95% of our portfolio in cash keeps us very flexible and able to take advantage of these crazy market swings as they come along. We're mainly in watch and wait mode this week as we wait to see if our strong bounce lines are taken out (see today's post) and today we have our Live Trading Webinar where we can discuss these positions (or anything else) at 1pm, EST.
Hope to see you there,
by phil - September 7th, 2015 7:35 am
We took the money and ran – now what?
As you can see, our Long-Term Portfolio is now swimming with cash as we cashed in our winners and kept the losers. Our losing positions include 24 short put sales that currently represent about $150,000 of that "Negative Market Value," though it's not really negative because we already have the Cash on Hand (a great benefit of selling puts), so it's just a matter of how much cash we need to give back in the end.
When we sell a put, we are promising to buy a stock for a certain price (the strike) and we get paid by the holder of the stock to make that promise. They benefit by putting a price floor under their stock and we benefit from getting cash in our pockets and, ultimately, from potentially buying a stock cheaply.
Unfortunately, most people are traders, not actual investors, and they tend to forget why they entered a short put trade in the first place. Because of that, when the short put positions turn negative in a market downturn, they tend to start thinking of them as losses, rather than progress made towards buying the stock at our discount target!
In the 2013 example in the video, the stock that is used is AT&T (T) and the strategy was to sell the Jan 2015 $30 put contracts for $2. This obligated us to buy the stock for $30 in exchange for $2 paid to us by the stockholder. Had it been assigned to us, our net entry would have been $28 (as we had the $2 in our pocket) and, as you can see, $28.90 was the 2014 low and it hit Jan 2015 well above $30.
So, in effect, we would have kept the $2 and not owned the stock and we could have then turned around and sold the Jan 2016 $30 puts for $2 and already we can sell the Jan 2017 $30 puts for $2.75 (higher premiums due to market volatility) or the 2017 $28 puts for good old $2. Either way, the concept is we don't have to own T at all (no cash out…
by phil - September 4th, 2015 8:30 am
That's right, we've had enough of these idiotic market moves and, after discussing the idea with our Members all week, I sent out Alerts this morning that we will be cashing out our main Virtual Tracking Portfolios ahead of what we consider market conditions that are simply too unsafe to hold large, bullish positions in.
We use our Short-Term Portfolio mainly to hedge the much larger, bullish positions in our Long-Term Portfolio, which is "only" up 35% but we also use the STP to make opportunistic calls, like our short calls on SCO and NLFX (click to enlarge).
Since going to CASH!!! means we'll have lots of money for opportunity trades, which are up 214.5%, I don't see it as a big negative that we're taking down our Long-Term Trades, which have relatively slogged along since we last went (mainly) to cash in May.
"The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants" is what Jefferson once said (and we are LONG overdue for a revolution in this country) and Phil says the tree of your portfolio must be refreshed from time to time by cashing out winners and losers alike and taking a nice, fresh look at the market.
It's not like we can't find anything to make money on. Over at Seeking Alpha we've been running a 5% (Monthly) Portfolio, with the goal of making 5% per month using various option strategies. We began trading it on August 8th (Saturday with an introduction) and it hasn't been a month but, already, our closed positions are indeed up net 5.5%:
If we can find 8 trades in less than 30 days that make a quick 5.5% (66% annualized), why fear going to cash? Cash is what keeps us flexible. Cash is, by far, the best possible thing to have in a crisis and it doesn't suck in a bull market either – especially when the Dollar is rallying anyway.
by phil - August 22nd, 2015 8:34 am
That's how much our Short-Term Portfolio gained on Friday during the market drop. During the session, we cashed out some of our winning hedges and added a few more conservative positions into the weekend – just in case China comes through with stimulus and pops the market.
That brought our cash position up from $255,000, at noted in the morning post, to $318,000. In other words, we cashed out $62,975 worth of winning positions – WHILE THEY WERE WINNING – this is something I work very hard to teach our Members, the forgotten skill of taking profits off the table!
As we calculated in Member Chat, we still had $45,000 of in-the-money protection after we cashed out the naked portions of our SDS, SQQQ and TZA hedges at 11:15. Then, later in the day, we didn't like the way the market looked so we added bull call spreads on SDS and SQQQ after noting that the S&P and the Nasdaq still had a lot further to fall if this is a proper correction.
What's the most important take-away here? WE CHANGED OUR MIND! We followed our Rule #1 and ALWAYS sold into the initial excitement because we got a good drop in the morning and we didn't want it to reverse on us. Then, once the bounces were weak and we began breaking down again – we simply bought another SDS position and more SQQQs.
A lot of traders are "embarrassed" to make a decision and then, even if they feel it was a mistake, to go back and re-buy the position – especially when they have to call a broker and "admit" they changed their mind. That's a huge problem because even the best traders are wrong 40% of the time and sticking to wrong decisions does not make you a better trader (trust me, I've tried!).
We take pokes at Futures entries all the time and rarely with conviction because we're only guessing where support will be and, if it fails – the quicker we CHANGE our minds the better! Again, this is one of the reasons that learning to trade the Futures can make you a much better trader…
by phil - August 13th, 2015 8:30 am
This is Part II.
I tweeted out part one (as well as Emailed an Alert to our Members) earlier this morning, so I'll take a break while you read that and get caught up…
In case you are wondering, the image on the right is the explosion at China's Tianjin port last night that registered as a 2.9 earthquake and has killed dozens and injured hundreds. It may have been an LNG accident or it may have been a chemical explosion but, either way, all 17 Republican candidates have vowed that we will not rest until the kind of laws that prevent cool explosions like this in the US are repealed so American businesses can fairly compete with China in industrial accidents.
As to the markets, suffice to say you can read yesterday's post and be all caught up as we're right back where we started from yesterday morning. Fortunately, we cashed in the EWJ shorts that we picked for our 5% Monthly Portfolio (see Seeking Alpha's Premium Research to join) and the 10 Sept $14 puts we bought on Monday afternoon for 0.90 hit our $1.35 target yesterday for a very nice $450 gain, which was 50% in just 2 days!
That trade alone puts us 10% of the way to our +$5,000 goal for the month (5% of our $100,000 portfolio) and our other 3 trade ideas have contributed another $800 of their own so far (all this week) for a perfect start and $1,200 gained for the week (so far).
Now, getting back to the broader task at hand – in our previous post we discussed whether or not the markets were going to continue to pull back or if, possibly, we are consolidating for a move higher and I said that, to make that call, we should focus on the S&P 500's top 25 stocks, which make up 44% of the indexes weighting. Those stocks are: